Net income declined 4.5 percent to $6.18 billion, or $3.18
a share, from $6.47 billion, or $3.27, a year earlier, the San
Ramon, California-based company said in a statement today. The
per-share result was 8 cents higher than the average of 19
estimates compiled by Bloomberg.

Chevron’s earnings from oil and gas wells outside the U.S.
rose 3.1 percent to $4.78 billion as increased gas output more
than offset lower crude production. In the U.S., the company
raised gas output from new wells in Appalachia’s Marcellus Shale
formation where most of the drilling costs are being borne by
India’s Reliance Industries Ltd. under the terms of a joint-venture.

Chevron “is almost drilling for free out there, so when
you combine that with the prolific nature of the Marcellus, the
returns are high,” Allen Good, an analyst at Morningstar Inc.
in Chicago, said in a telephone interview today.

Total sales declined by 6.4 percent to $56.8 billion on
slumping oil prices. During the January-to-March period, Brent
crude futures fell 4.9 percent from a year earlier to average
$112.61 a barrel, according to data compiled by Bloomberg.

Chevron rose 1.3 percent to $120.04 at the close in New
York.

Increasing Production

Chevron is spending $36.7 billion this year on exploration,
gas-export terminals and refinery upgrades from the Indian Ocean
to British Columbia after oil and gas output fell to a four-year
low in 2012. Chairman and Chief Executive Officer John S. Watson
has expanded the company’s onshore North American holdings and
last month said it will use intensive drilling techniques
perfected in U.S. shale formations to unlock crude reserves in
the deep-water Gulf of Mexico.

The company’s worldwide production increased 0.5 percent to
the equivalent of 2.65 million barrels of oil a day during the
first quarter, according to the statement.

During the quarter, Chevron raised U.S. gas output by 7.3
percent as prices that touched a 10-year low in early 2012
surged 39 percent to an average of $3.48 per million British
thermal units during the quarter.

Chevron entered the Marcellus Shale in 2011 with the
acquisition of Atlas Energy Inc. The transaction included a
previously-signed joint venture between Atlas and Reliance that
committed the Indian company to cover most of the drilling costs
in exchange for a stake in each well.

Outperforming Exxon

Chevron expects oil and gas production to increase 1.5
percent this year to a daily average equivalent to 2.65 million
barrels a day, the company said in a slide presentation for
analysts on March 13. The outlook assumes an average crude price
of $112 a barrel for 2013.

Chevron reaps 70 percent of its operating earnings from oil
and gas sales outside the U.S., Paul Cheng, an analyst at
Barclays Plc, said in an April 8 note to clients. Among U.S.-
based international oil producers, only Marathon Oil Corp. and
Exxon gather a higher proportion of earnings overseas, according
to Cheng.

Exxon is the world’s largest energy company based on market
value, followed by PetroChina Co., according to data compiled by
Bloomberg.

(Chevron has scheduled a conference call to discuss first-quarter results at 11 a.m. New York time. To access the call,
click on LIVE <GO>.)